Beehive Telephone Co. v. Federal Communications Commission

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 26, 1999 Decided June 25, 1999

No. 98-1293

Beehive Telephone Company, Inc., and
Beehive Telephone Inc., Nevada,
Petitioners

v.

Federal Communications Commission and
United States of America,
Respondents

AT&T Corporation,
Intervenor

On Petition for Review of an Order of the
Federal Communications Commission

Russell D. Lukas argued the cause and filed the briefs for
petitioners.

 K. Michele Walters, Counsel, Federal Communications
Commission, argued the cause for respondents. On the brief
were Joel I. Klein, Assistant Attorney General, U.S. Depart-
ment of Justice, Robert B. Nicholson and Robert J. Wiggers,
Attorneys, Christopher J. Wright, General Counsel, Federal
Communications Commission, John E. Ingle, Deputy Associ-
ate General Counsel, and Laurel R. Bergold, Counsel.

James P. Young argued the cause for intervenor. With
him on the brief were Mark C. Rosenblum, Peter H. Jacoby,
and Peter D. Keisler. David W. Carpenter entered an ap-
pearance.

Before: Ginsburg and Rogers, Circuit Judges, and
Buckley, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge Ginsburg.

Ginsburg, Circuit Judge: The Federal Communications
Commission determined that the rate Beehive Telephone
Company charged interexchange carriers (IXCs) for local
switching service was unjust and unreasonable, and it ordered
the Company to refund the overcharges. Beehive sought
reconsideration of that decision, which the Commission grant-
ed in part and denied in part. Beehive then petitioned this
court for review which, for the reasons that follow, we deny.

I. Background

Beehive is a local exchange carrier (LEC) operating in
parts of nine counties in Utah and in two counties in Nevada.
Beehive first filed its own tariff in 1994, having previously
charged the interstate local switching rates filed by the
National Exchange Carrier Association (NECA) on behalf of
participating LECs. As a small LEC Beehive has the option
of filing tariffs for traffic-sensitive interstate access charges
under rules different from those that apply to larger LECs.
See 47 C.F.R. s 61.39(a). In addition, while the largest
LECs--the regional Bell Operating Companies and GTE--
must calculate their tariffs under the Commission's price cap
regulations, Beehive can and did opt for rate of return

regulation. See id. s 61.41(a)(3); see also United States Tel.
Ass'n v. FCC, ___ F.3d ____, 1999 WL 317035, at *1 (D.C.
Cir. May 21, 1999).

On July 22, 1997 Beehive filed a new tariff changing its
interstate access charge. That charge has three compo-
nents--a per-minute local transport termination charge, a
per-minute local switching charge, and a per-minute per-mile
charge for local transport facilities--each of which differs for
premium and non-premium service (for the former of which
AT&T may be the only customer). In the new tariff Beehive
proposed to reduce its premium and non-premium charges for
local transport termination and for the use of its local trans-
port facilities, but to increase its per minute charge for local
switching to $0.04012 from $0.0348 for premium service and
to $0.01805 from $0.01566 for non-premium service.

AT&T filed a petition opposing Beehive's tariff. After
reviewing AT&T's submission and Beehive's response there-
to, the Commission was "not persuaded based on the present
record that Beehive has shown that its proposed rate levels
are justified under existing rules governing its interstate
access charges." The Commission therefore suspended Bee-
hive's tariff for one day and instituted an investigation.
Nearly four months later the agency issued a "Designation
Order" setting down the following issue for investigation:
"Whether Beehive's traffic sensitive local switching rate is
based on its interstate cost of service for the period since its
last annual filing and related demand for the same period."
In order to resolve that issue and to determine "whether its
proposed switching rate for 1997/98 is reasonable ... in light
of historical cost and demand trends," the Commission direct-
ed Beehive "to provide detailed cost data for calendar years
1994, 1995, and 1996" and to explain "any changes in costs
and demand from year to year."

At that point, the Commission had just over one month in
which to complete its investigation into the lawfulness of
Beehive's tariff. See 47 U.S.C. s 204(a)(2)(A) ("the Commis-
sion shall ... issue an order concluding [a] hearing [under

s 204] within 5 months after the date that the charge ...
becomes effective"). In the Designation Order the Commis-
sion first set out a briefing schedule giving Beehive ten days
in which to prepare its direct case, with briefing to conclude
on December 29, 1997, eight days before the Commission's
decision was due. Later in the order, however, the agency
set forth another schedule, which gave Beehive 15 days in
which to present its direct case, with briefing to conclude on
December 31, 1997. Six days later the Commission amended
the Designation Order to confirm the former schedule, where-
upon Beehive sought an extension of the deadline for submis-
sion of its direct case, which the Commission granted to the
extent of three days. Beehive submitted the bulk of its direct
case on the new filing date, but the agency accepted supple-
mental materials that Beehive filed on the following two days
and again later in connection with its rebuttal of AT&T's
opposition.

On January 6, 1998 the Commission issued an "Investiga-
tion Order" concluding its inquiry and holding that Beehive's
proposed rate for local switching was unreasonable. First,
the Commission found that Beehive "did not explain or pro-
vide data supporting the changes in its costs and demand
from year to year." Indeed, Beehive admitted that it had
erroneously based its proposed tariff only upon its 1996 cost
and demand figures, and not upon the figures for both 1995
and 1996 as required by 47 C.F.R. s 61.39(b)(1)(ii). The
Commission further noted that Beehive's rate of return for
local switching had been 111% in 1995 and 65% in 1996, well
over the 11.25% rate of return the agency had prescribed for
LECs. In sum, "Beehive's failure to justify or support its
proposed increase in operating expenses and its use of an
unauthorized rate of return in calculating the interstate local
switching rates" led the Commission to conclude that "Bee-
hive's rates ... are unjust and unreasonable."

The Commission then prescribed a rate for the purpose of
calculating refunds. The agency based that rate upon the
ratio of total operating expenses (TOE) to total plant in
service (TPIS) for similarly sized LECs that reported data to
the NECA in 1995 and 1996. (The Commission assumed that

Beehive would have a similar TOE to TPIS ratio, "[a]bsent
unusual circumstances, which Beehive has not shown in this
record.") The mean TOE to TPIS ratio for those LECs was
21.55%. "By contrast, the data upon which Beehive comput-
ed the local switching rates contained in [its 1997 tariff] show
a ratio ... of 59.96%." Yet Beehive had reported ratios of
23.55% and 24.03% to the NECA in 1994 and 1995. Allowing
that Beehive might be a higher-than-average cost LEC, the
Commission adopted a TOE to TPIS ratio of 25% which,
combined with the 11.25% permissible rate of return and
Beehive's demand figures, led it to prescribe rates of
$0.009443 for premium switching service and $0.004249 for
non-premium switching service. Based upon these rates,
Beehive submitted a plan to refund about $141,000 to its
customers, which the agency approved.

Beehive sought reconsideration of the Investigation Order,
claiming that the short briefing and decision-making period
deprived it of its right to a full hearing; it did not use an
unauthorized rate of return in calculating its local switching
rates; it was not permitted to comment upon the NECA data
the Commission used to prescribe a rate; it is an unusually
high cost LEC for its size; the Commission adopted an
erroneous demand figure; and the prescribed rate constituted
a taking prohibited by the Fifth Amendment to the Constitu-
tion of the United States. The Commission granted the
petition for reconsideration to the extent of admitting that it
had erred in calculating Beehive's demand, and revised the
prescribed local switching rates to $0.010106 and $0.004548
for premium and non-premium service, respectively; it denied
Beehive's petition in all other respects.

Beehive then petitioned this court for review, invoking our
jurisdiction under the Hobbs Act, 28 U.S.C. s 2342. Its
petition, however, seeks review only of the Reconsideration
Order and not of the underlying Investigation Order.

II. Analysis

AT&T, intervening on behalf of the Commission, argues
that the Reconsideration Order is not reviewable and that

this court must therefore dismiss the petition for review for
lack of jurisdiction. The Commission adopted AT&T's posi-
tion at oral argument. We agree that the Order is unreview-
able but, as explained below, not for want of jurisdiction.

A. Jurisdiction and the Standard of Review

In Southwestern Bell Telephone Co. v. FCC, No. 98-1197,
released today, we hold that "a petition seeking review of an
agency's decision not to reopen a proceeding is not reviewable
unless the petition is based upon new evidence or changed
circumstances." Slip op. at 7. That decision follows the
teaching of the Supreme Court in ICC v. Brotherhood of
Locomotive Engineers, 482 U.S. 270 (1987): When an agency
"refuses to reopen a proceeding, what is reviewable is merely
the lawfulness of the refusal ... [and] overturning the refusal
to reopen requires 'a showing of the clearest abuse of discre-
tion.' " Id. at 278 (emphasis in original). Reviewing its past
decisions, the Court noted that it had entertained a petition to
review an agency's refusal to reopen a proceeding only in
cases alleging new evidence or changed circumstances and
never in a case alleging only material error. See id. at 278-
79. Further, the Court held that the Administrative Proce-
dure Act "codifies the nature and attributes of judicial review
[under the Hobbs Act], including the traditional principle of
its unavailability 'to the extent that ... agency action is
committed to agency discretion by law.' " Id. at 282 (quoting
5 U.S.C. s 701(a)(2)). Because the Court "perceive[d] that a
... tradition of nonreviewability exist[ed] with regard to
refusals to reconsider for material error," it concluded that
"the agency's refusal to go back over ploughed ground is
nonreviewable." Id. at 282-84.

Beehive argues that BLE is inapplicable to this case in view
of s 405(b) of the Communications Act, which the Congress
added in 1988. It provides:

(b)(1) Within 90 days after receiving a petition for
reconsideration of an order concluding a hearing under
section 204(a) of this title or concluding an investigation

 under section 208(b) of this title, the Commission shall
issue an order granting or denying such petition.

(2) Any order issued under paragraph (1) shall be a
final order and may be appealed under section 402(a) of
this title.

Because the Investigation Order concluded "a hearing under
section 204(a)," Beehive maintains that the Reconsideration
Order is "a final order [that] may be appealed under section
402(a)," which states that "[a]ny proceeding to ... set aside
... any order of the Commission ... shall be brought as
provided by and in the manner prescribed in" the Hobbs Act.
Further, Beehive contends that s 405(b) both overrides the
"tradition of nonreviewability ... with regard to refusals [of
the Commission] to reconsider for material error" and ren-
ders the Commission's decision upon reconsideration one not
committed to agency discretion. BLE, 482 U.S. at 282.

Beehive misapprehends the import of s 405(b), however.
First, that provision states merely that certain types of
orders granting or denying petitions for reconsideration are
appealable under the Hobbs Act. As the Supreme Court
pointed out in BLE, "[w]hile the Hobbs Act specifies the form
of proceeding for judicial review of ICC orders, it is the
[APA] that codifies the nature and attributes of judicial
review." Id. Nothing in s 405(b) alters the standard of
review that a court would apply in reviewing a decision of the
Commission granting or denying a petition for reconsidera-
tion. Accordingly, "the impossibility of devising an adequate
standard of review" for an order denying a petition for
reconsideration based upon a claim of material error contin-
ues to counsel against review of such a petition. Id.

Nor does s 405(b) alter the "tradition of nonreviewability
... with regard to refusals to reconsider for material error."
Id. When the Congress added subsection (b) to s 405 it also
added ss 204(a)(2)(C) and 208(b)(3) to the statute. Both
provisions make "[a]ny order concluding a hearing [or investi-
gation] under [s 204(a) or s 208(b)] ... a final order [that]
may be appealed under section 402(a)." Even without those
sections, however, no one could seriously argue that an order
of the Commission concluding a hearing or investigation

under s 204(a) or s 208(b) was not among the final orders
made appealable in s 402(a). That is, if ss 204(a)(2)(C) and
208(b)(3) are not superfluous, it is only because they serve,
"in Macbeth's words, 'to make assurance double sure.' "
Shook v. District of Columbia Fin. Responsibility & Manage-
ment Assistance Auth., 132 F.3d 775, 782 (D.C. Cir. 1998).
We read s 405(b)(2) in the same light: it merely makes
explicit what was already implicit, namely, that an order
denying a petition for reconsideration of an order concluding
a hearing under s 204(a) or an investigation under s 208(b) is
a final order that, pursuant to s 402(a), is appealable under
the Hobbs Act.

Finally, the Commission's decision to deny a petition for
reconsideration remains committed to agency discretion, and
therefore unreviewable as provided in the APA. More specif-
ically, while s 405(b)(1) limits the Commission's discretion
with regard to the timing of its disposition of a petition for
reconsideration under s 204(a), it does not constrain the
Commission's discretion with regard to the merits of such a
petition, and the APA precludes review of agency action "to
the extent ... committed to agency discretion by law." 5
U.S.C. s 701(a)(2).

In sum, pursuant to ss 402(a) and 405(b)(2), this court has
jurisdiction over Beehive's petition, which seeks review of a
final order of the Commission and was filed in conformity
with the requirements of the Hobbs Act. The BLE decision,
in turn, governs the reviewability of the Commission's order
denying rehearing. Cf. Heckler v. Chaney, 470 U.S. 821, 825,
837-38 (1985) (jurisdiction over petition for review grounded
in 28 U.S.C. s 1331, but agency action complained of in
petition unreviewable under APA). Accordingly, we now turn
to Beehive's two arguments that the Reconsideration Order is
reviewable under the standard set out in BLE because Bee-
hive's petition alleged new evidence or changed circum-
stances.

B. New Evidence

In BLE, the Court explained that the denial of a petition
for reconsideration that raises new evidence is reviewable

because otherwise "the petitioner will have been deprived of
all opportunity for judicial consideration--even on a 'clearest
abuse of discretion' basis--of facts which, through no fault of
his own, the original proceeding did not contain." 482 U.S. at
279. The evidence to which Beehive now refers us does not
come within this rationale for review.

In its petition for reconsideration, Beehive sought to intro-
duce evidence that its costs are unusually high compared to
those of other LECs of a similar size. Beehive noted that it
"is among the lowest density LECs in terms of access lines
per exchange and per mile" and that it "has more exchanges
(14) than the nearest similarly sized LEC (9)." Further, it
argued that its "TOE to TPIS anomaly is explained by the
fact that it uses leased switching equipment at four of its
exchanges." Section 405(a), however, limits the evidence
admissible upon reconsideration to "newly discovered evi-
dence, evidence which has become available only since the
original taking of evidence, [and] evidence which the Commis-
sion ... believes should have been taken in the original
proceeding." Beehive's evidence was clearly not new "in the
sense of being discovered after the Commission issued its
Investigation Order." Southwestern Bell, slip op. at 8.
Moreover, it was evidence that Beehive had reason to submit
to the Commission as part of its direct case; the Designation
Order required Beehive to provide "an explanation and data
supporting any changes in costs and demand from year to
year," of which the evidence detailed above would have been a
part. Therefore, Beehive could have and should have put its
purportedly new evidence before the Commission in the
original proceeding, not at the reconsideration stage.

In any event, even if we were to review Beehive's claim to
have submitted new evidence, under the abuse of discretion
standard implicit in BLE we would have to reject it. The
Commission declined to allow the Company to introduce its
purportedly new evidence because it found "that Beehive
ha[d] failed to satisfy the requirements of Section 405[(a)] of
the Communications Act and Section 1.106(c) of the Commis-
sion's rules." Pursuant to that rule, the Commission may
grant a "petition for reconsideration which relies on facts not

previously presented" only if such facts have changed since,
or could not through ordinary diligence have been learned
prior to, the petitioner's last opportunity to present such
matters, or if the Commission determines that consideration
of such facts "is required in the public interest." 47 C.F.R.
s 1.106(c). Because Beehive knew, when it submitted its
direct case, of the evidence it sought to present upon recon-
sideration, that evidence could be admitted only under the
public interest standard. Inasmuch as Beehive does not even
argue that standard is satisfied, we could hardly say that the
Commission abused its discretion in refusing to admit that
evidence.

Beehive does contend that, because it "sought reconsidera-
tion largely on due process grounds and the remedy it sought
was for the FCC to reopen the record to consider new facts,"
the Reconsideration Order is reviewable under our reasoning
in Fritsch v. ICC, 59 F.3d 248 (1995). In that case a railroad
(CSX) had sought and received the approval of the Interstate
Commerce Commission to abandon a line. Almost six months
after CSX abandoned the line it reached an agreement with a
county parks department to convert part of the line into a
nature trail. Upon the petition of CSX the ICC reopened the
abandonment proceeding and approved the rail-to-trail con-
version. Six days after the time for seeking reconsideration
of that order had expired, a group of landowners over whose
property the trail would run filed a petition to reopen the
ICC proceeding, which the ICC denied. We held that the
landowner's petition presented the ICC with "new material,"
namely, their claim that they were denied the opportunity to
submit protests against CSX's petition to reopen. Id. at 251.
Therefore, the denial of their petition was reviewable under
the exception in BLE for petitions raising new matter. See
id. at 252.

The rationale for our decision in Fritsch is clearly inappli-
cable here: if review of the ICC's denial of the landowners'
petition were not available as new material under BLE, then
a party "deprived of due process in an original agency
petition could never obtain review of the merits although he
never learned, actively or constructively, of the proceedings

to deprive him of his rights until after the expiration of the
[Hobbs Act] review period." Id. Unlike the landowners in
Fritsch, Beehive filed its petition for rehearing within the 30-
day statutory period for seeking reconsideration of a Commis-
sion order, see 47 U.S.C. s 405(a), thereby tolling the period
for seeking judicial review of the Investigation Order. See
Southwestern Bell Tel. Co. v. FCC, 116 F.3d 593, 596-97 (D.C.
Cir. 1997); see also 28 U.S.C. s 2344. Accordingly, Beehive
could have sought judicial review of the alleged denial of due
process by filing a timely petition for review of the Investiga-
tion Order following issuance of the Reconsideration Order.

Because Beehive has not made a showing of either new
evidence or changed circumstances, "we must deny its peti-
tion for review unless ... its petition seeks review of some-
thing other than the agency's refusal to reopen the proceed-
ing." Southwestern Bell, slip op. at 8-9. Beehive has two
arguments to that effect, which we consider in the next
section.

C. Other Grounds for Reviewing the Reconsideration Order

First, Beehive notes that its filing a petition for reconsider-
ation of the Investigation Order "rendered [that] order nonfi-
nal and unreviewable as to [it]," which clearly is correct. See
Bellsouth Corp. v. FCC, 17 F.3d 1487, 1489 (D.C. Cir. 1994)
("[A] party that stays before an agency to seek reconsidera-
tion of an order cannot at the same time appear before a
court to seek review of that same order, any more than the
party could literally be in two places at the same time").
Then, Beehive urges that its petition for reconsideration
transformed the Investigation Order into an interlocutory
order and that "its petition for review of the Reconsideration
Order [brought up] for review 'all interlocutory orders which
preceded it.' " By denying reconsideration, however, the
Commission confirmed the Investigation Order as a final
order subject to judicial review; the Investigation Order
never was an interlocutory order. See id. at 1490.

Second, Beehive argues that because the Commission
granted reconsideration in part, the Reconsideration Order is

a "new order immediately appealable" under BLE. 482 U.S.
at 286. In BLE the Court, in a dictum, did state that when
an agency "reopens a proceeding for any reason and, after
reconsideration, issues a new and final order setting forth the
rights and obligations of the parties, that order--even if it
merely reaffirms ... the original order--is reviewable on its
merits." Id. at 278; see also id. at 286 ("If, of course, the
ICC's action here had gone beyond what was (at most)
clarification of an ambiguity, and in the guise of interpreting
the original order in fact revised it, that would have been a
new order immediately appealable" (emphasis in original)).
In the same decision, however, the Court made clear that
whether an agency has reopened a proceeding is dependent
upon the formalities of its action: "Where the Commission's
formal disposition is to deny reconsideration, and where it
makes no alteration in the underlying order, we will not
undertake an inquiry into whether reconsideration 'in fact'
occurred." Id. at 280. In this case, the Commission simply
amended its prior order by adjusting the amount of Beehive's
refund obligation. Accordingly, only the portion of the order
actually reopened, which Beehive does not challenge, is re-
viewable on its merits. Cf. Poulin v. Bowen, 817 F.2d 865,
869 (D.C. Cir. 1987) (when agency exercises discretion to
reopen proceeding, new order is reviewable "to the extent of
the reopening"). Therefore, we reject Beehive's arguments
that it sought review of something other than the order
denying rehearing.

III. Conclusion

Beehive sought review solely of an order denying reconsid-
eration. For the reasons set forth above, that order is
unreviewable, and the petition for review is therefore

Denied.